SPX Spent This Whole Week Rangebound. Breakout Next Week? July 14 Plan
The past three weeks have been all about one chart pattern in ES: Triangles. As I dsicussed yesterday, ES essentially only does two things. It consolidates (I call this Mode 2), and it trends (I call this Mode 1). Price spends about 90% of the time consolidating, and 10% of the time trending. Furthermore, price cycles between these two things. Consolidation produces trend, which produces consolidation, indefinitely. These consolidations will form a chart pattern, and for the last three weeks, its always been a triangle, which has in turn, produced roughly proporionate trend legs.
For the two weeks prior to June 23rd, ES was in consolidation and the pattern was a triangle. I provided this setup way back on Friday June 20th at 4pm when we were 6020, by stating: “My general lean is always to defer to the trend, until it ends. 5978-82 to 6081= a range (descending triangle). My lean is we work back up to 6050, then 6081. Above there, we can try breakout.” As a general rule in technical analysis, two week structures lead to two week rallies and this is precisely what we saw for the two weeks prior to this week. We rallied for 10 days exactly following June 23rd. The traditional “measured move” target for a rally of this size was roughly 6325 as readers knew, and by last Thursday, we hit 6333 which was the high and this completed the triangle.
After a massive trend move like that though, ES needs head back into consolidation, and this is what we saw Monday-Wednesday this week as ES digested the 10 day rally, and built out another chart pattern. What was the new pattern here? Yet again, a triangle. I confirmed at the close Wednesday, stating: “ES is building a new triangle 6311 to 6252 now with 6277 magnet. We are near resistance now. We could fill this out more but the bull case would be this breaks out, and targets 6319, 6325-30…In an “ultra bull case” tomorrow, we won’t even fill this triangle out more and will instead just base out 6311 to 6288, then head up. ” Yesterday we saw exactly this. We held 6288 early Thursday morning, broke out the triangle, rallied to 6330 high yesterday.
The question for bulls today was whether they can defend this breakout, or whether a three day consolidation was too premature to fuel a new leg up, its why I called my last newsletter New All Time Highs Obtained For SPX. New Leg Starting, Or Will It Fizzle Out? Tariff headlines last night at 8pm temporarily made that decision for ES and we flushed from 6330s down to 6280s rapidly. What happened then? The dip was bought as usual. I wrote yesterday at 4pm: “One option I like is a Failed Breakdown of last nights [Thursday 3:15AM] 6288 low. Ideal if we can tag 6285 at least on this, but we could go lower”. We got this at 830PM last night and again this morning, and up we went to 6311+
Ultimately though, ES spent all week consolidating. Can we break the range next week? In today’s newsletter I’ll talk this, I’ll do a deep dive into a quality Failed Breakdown we had on Tuesday evening (where we lost and recovered the Tuesday 6263 daily low), as this setup got us long for the rally into this weeks highs. This is a good example to learn from. Finally, I’ll discuss the actionable trade plan for Monday.